DAYANG: Offshore Services Provider Poised for Recovery, Target Price Raised
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
An offshore services provider is positioned for a significant rebound, buoyed by long-term contracts, a proactive fleet renewal programme, and anticipated resolution of key industry disputes. Despite facing near-term seasonal headwinds, the company’s strategic initiatives and robust order book underpin a positive long-term outlook, prompting a reiterated ‘BUY’ rating from a leading investment bank.
Operational Strengths and Long-Term Contracts
Recent site visits have affirmed the company’s strong operational capabilities, particularly highlighting the performance of its advanced 4-point mooring accommodation workboats. Four of these vessels, including the inspected Dayang Opal, have secured crucial 3+3 year long-term contracts with Petronas Carigali, extending earnings visibility through 2027. This substantial order book provides a solid foundation for future revenue streams.
Strategic Fleet Renewal
To enhance efficiency, operational reliability, and support long-term growth, the company is actively pursuing a fleet renewal programme. With an average fleet age of 15 years, plans are underway to retire older vessels, such as the 20-year-old Pertama, and invest in new, more capable workboats. A new 238-berth workboat, costing an estimated RM130 million, is scheduled for construction in 1Q26 over a 22-month period. This modernization effort is expected to boost fuel efficiency and significantly reduce maintenance and operating costs. Furthermore, a lighter schedule for mandatory dry-docking activities in 2026, compared to 2025, is projected to maximize fleet utilization and availability.
Navigating Near-Term Challenges
The company anticipates a softer operational period in 4Q25 and 1Q26, primarily due to seasonal monsoon weather. This will likely lead to reduced offshore activity, lower vessel utilization (expected to ease from 80% to approximately 45% in 4Q25), and scheduled maintenance, repair, and refurbishment activities across its fleet, incurring estimated costs of RM10 million. However, this dip is considered temporary, with a recovery anticipated from 2Q26 as weather conditions improve and deferred projects resume.
Future Growth and Investment Perspective
Beyond the seasonal challenges, the outlook remains robust. The expected resolution of the Petronas-Petros dispute in early 2026 is poised to reactivate previously delayed projects and significantly boost offshore activity and vessel utilization. Earnings growth is projected at 13-37% over 2026-27E, following an anticipated 45% decline in 2025E attributed to lower oil prices and trade tensions. Supported by strong operating cash flow and a healthy net cash position of RM261 million, the company is also expected to maintain a steady dividend yield. An investment bank has reiterated a ‘BUY’ rating, highlighting the company’s attractive risk-reward profile, with its current valuation reflecting an attractive entry point despite recent share price declines.
